Equity crowdfunding provider welcomes financial market regs
Thursday 27 February
For Immediate Release
NZ equity crowdfunding provider welcomes new financial market regulations
The Directors of soon-to-launch equity crowdfunding provider Snowball Effect have welcomed Cabinet’s approved regulations for crowdfunding and peer-to-peer lending as part of the Government’s financial market overhaul.
In particular they have applauded the announcement that there will be no investor caps for equity crowdfunding, other than the previously announced $2 million cap that a company can raise through crowdfunding each year.
“We have held the strong view for a long time that caps are a blunt instrument for investor protection,” says Snowball Director, Simeon Burnett.
“We opposed the introduction of investor caps, because we believed that investors would easily be able to circumvent such controls by investing in foreign crowdfunding platforms, or investing through entities which do not reveal the ultimate owner. We also believe that individuals should be allowed to make their own decisions about their money.
“Clearly however, if equity crowdfunding is going to develop sustainably in New Zealand, there needs to be reasonable safeguards for investors so they are best placed to understand the risks and characteristics of the investments they are making.
“Investor protection in the regulations comes in many forms, including the requirement for share issuers to seek funds only through licensed providers, the requirement for the licensed providers to conduct background checks on issuers and directors, and the requirement to make investors aware of the inherent risks associated with investment via equity crowdfunding.”
Mr Burnett says extensive market research has shown that everyday investors and New Zealand and SMEs are struggling to connect, but want to do so.
“Our vision is a New Zealand economy fuelled by emerging businesses backed by everyday Kiwi investors,” he says.
“The country’s economic engine room is small to medium-sized enterprises (SME’s) and there are thousands of them with big vision who can’t take the next step on the growth ladder because the banks won’t lend, and other sources of capital don’t fit or are cost prohibitive. There are also thousands of New Zealanders with innovative ideas that can’t get them off the ground because raising start-up capital is typically limited to loans from friends and family.
“On the other side, tens of thousands of proud Kiwi investors or would-be investors would love to take a stake in one of the most dynamic sectors in the economy, but are currently unable to do so, particularly if they only have a small amount of money that they're willing to invest.”
Burnett says Snowball Effect will open the market up by connecting the two groups.
Snowball Effect is scheduled to launch in April once it is licensed by the FMA under the regulations.